Earlier this week, the Labour AM Eluned Morgan asked the Welsh Government to develop a dedicated plan for the rural economy in Wales given the high degree of uncertainty going forward following the Brexit vote.
I couldn’t agree more but rural Wales, even prior to last June’s vote to leave the European Union, has faced many challenges over the last two decades including depopulation by young people, a decline in household incomes, the increased price of housing (especially for first time buyers), a decline in public services and transport, and the closure of rural schools.
In addition, rural businesses have had to face very different problems as compared to their counterparts in urban areas such as Cardiff, Wrexham, Newport, Swansea and the South Wales Valleys.
For example, one of the key competitive disadvantages faced by many rural businesses is that of small local markets, combined with the distance from major national and international markets.
This emphasises the importance of appropriate business support assistance to help with market development, exporting and marketing, a problem that is exacerbated by the fact that traditional financial and business support is typically weaker in rural areas.
In particular, commercial providers of business services - such as accountants or law firms - tend be thinner on the ground and have less extensive expertise in key areas.
Lower business densities in rural areas also make it more expensive to deliver business and training support than to comparable urban-based firms, which means that it is important for rural firms to access the right type of advice from the business network.
This ‘rural premium’ can also make it very expensive for firms to participate in training sessions, business meetings and network events.
Of course, this market remoteness is not always a weakness and can also be turned to the advantage of the local economy. This is because many rural businesses will reach the capacity of the local market at an earlier stage than urban firms, and may have to adopt a more proactive approach in seeking our new market opportunities than those businesses based within densely populated areas.
This creates more specific challenges to entrepreneurial rural businesses as they will need to adopt a highly pro-active marketing method in order to extend their geographical markets. This can result in specific management problems for young rural firms as they require specialist knowledge and expertise which is often lacking in the business itself.
Another key issue for many rural businesses wishing to expand and grow their activities is the absence of suitable premises and an adequate pool of skilled labour.
Whereas urban areas are generally characterised by a wide range of different types of business property, this is invariably not the case in rural areas. Whilst there are certain advantages in having space availability at low cost in rural areas, there are also significant constraints affecting growing businesses resulting from the shortage of larger premises.
In many cases, the scarcity of larger premises in these localities is attributed to strict planning policies. This issue needs to be addressed sensitively but practically by local authorities as there is a clear need for a variety of sizes and types of business property in rural areas if the space requirements of businesses at different stages of development are to be met and if growing businesses are going to be retained within the rural economy.
The small size and occupational composition of rural labour markets can also impose a constraint on growing small firms, making it necessary to attract recruits from more distant locations.
Lower pay levels and a reliance on informal recruitment practices can make this difficult to achieve.
As a result, rural firms attempt to retain labour, with a willingness to train as a means of obtaining the required skills, although locational factors and their distance from centres of population means that many rural firms are disadvantaged in terms of access to suitable training opportunities which are based within towns and cities.
Finally, rural firms must take advantage of the potential offered by new technologies to improve links with customers and suppliers, and reduce the comparative disadvantage of remoteness. But whilst broadband is allegedly being made increasingly available across the whole of Wales, it still seems likely that many parts of rural Wales will be amongst the last areas to receive access because of the relatively low and dispersed nature of the demand.
Therefore, Baroness Morgan is right to highlight the issues facing the rural economy in Wales and it is clear that any economic support to businesses in rural Wales needs to take account of the distinctive environment in which firms operate such as the relatively small size of the local market, the limited opportunities to trade and network with other local businesses, and the small size and restricted skill base of the local labour market.
However, if the Welsh Government can begin to appreciate the unique economic nature of rural
Wales and develop a strategy that can address their particular weaknesses, then the entrepreneurial potential of many rural businesses can be realised and they can make a real difference to the wealth and employment of this very special part of the Welsh economy.